Financial institutions have a legal and moral responsibility to deny loans to individuals who are not creditworthy and cannot repay the debt. This may at times seem discriminatory, but approving loans for people without the means to repay them created the foundation for the Great Recession. Naturally, lenders—as well as the institutions that regulate them—want to discourage similar events from happening in the future.
Banks are free to set their own lending standards based on economic characteristics such as credit score, debt levels, and employment income. The Fair Housing Act also allows lenders to consider things like the property’s condition, local home values, neighborhood amenities, and their own need for a balanced loan portfolio when evaluating an applicant.*
Please note that nowhere in the above quote does it say that Red Lining is a discriminatory process not to extend loans to Black, Hipanics or any other racial group though you might conclude it applioes to poor people.
Mike Bloomberg said the following:
“It probably all started back when there was a lot of pressure on banks to make loans to everyone,” Mr. Bloomberg said in a lecture at Georgetown University in September 2008. “Redlining, if you remember, was the term where banks took whole neighborhoods and said, ‘People in these neighborhoods are poor, they’re not going to be able to pay off their mortgages, tell your salesmen don’t go into those areas.’”**
Please note that nowhere in the above Bloomberg quote does it say that Red Lining only applies to loans to Blacks, Hipanics or any other racial group though he says it applied to poor people. While many Balcks, Hispanics, and other racial groups may be poor, there are more poor whiles than the minority groups.
But the fact is that making loans to people who couldn/t afford to repay them was a terrible thing and eventually resulted in the collapse of our financial system and the Great Recession.
Our own experience:
Back in 2005, my wife and I took out a construction loan with a major regional bank with few questions asked. When the money from the sale of our previous home came through, we paid off the construction loan and the bank said they were willing to make the inspections anyway. We agreed. They were so nice.
In 2012, we palnned to move to a continuing care facility and naturally applied to the same bank for a loan on the home to pay for the entry fee to the continuing care facility. Then every few days or weeks, I received an e-mail to answer some questions. This continued on and on for almost the entire year and really drained me psycologically.
Much to my surprise, the bank finally denied us the 80 percent loan on the home valued at their appraisal value which, at that time was much lower (maybe 40 percent) than what we had paid for the home. The reason given was that we had inapproropiriate assets (stocks and bonds) though our assets were valued at many times the amount of the loan in addition to our income.
We were told that "maybe" they could give us a $100,000 home improvement loan, but I didn't want to play that game of "maybe." So we sold some of our inappropriate assets, paid the entry fee at the continuing care facility, and gifted the home to the oldest son.
You hear the statment that "only people can get a loan that don't need it." In our case, we didn't need th loan and still couldn't get it. You don't need to be poor to be refused a loan.
* https://www.thebalance.com/definition-of-redlining-1798618
** https://www.nytimes.com/2020/02/13/us/politics/michael-bloomberg-redlining.html?auth=login-email&login=email
“It probably all started back when there was a lot of pressure on banks to make loans to everyone,” Mr. Bloomberg said in a lecture at Georgetown University in September 2008. “Redlining, if you remember, was the term where banks took whole neighborhoods and said, ‘People in these neighborhoods are poor, they’re not going to be able to pay off their mortgages, tell your salesmen don’t go into those areas.’”**
Please note that nowhere in the above Bloomberg quote does it say that Red Lining only applies to loans to Blacks, Hipanics or any other racial group though he says it applied to poor people. While many Balcks, Hispanics, and other racial groups may be poor, there are more poor whiles than the minority groups.
But the fact is that making loans to people who couldn/t afford to repay them was a terrible thing and eventually resulted in the collapse of our financial system and the Great Recession.
Our own experience:
Back in 2005, my wife and I took out a construction loan with a major regional bank with few questions asked. When the money from the sale of our previous home came through, we paid off the construction loan and the bank said they were willing to make the inspections anyway. We agreed. They were so nice.
In 2012, we palnned to move to a continuing care facility and naturally applied to the same bank for a loan on the home to pay for the entry fee to the continuing care facility. Then every few days or weeks, I received an e-mail to answer some questions. This continued on and on for almost the entire year and really drained me psycologically.
Much to my surprise, the bank finally denied us the 80 percent loan on the home valued at their appraisal value which, at that time was much lower (maybe 40 percent) than what we had paid for the home. The reason given was that we had inapproropiriate assets (stocks and bonds) though our assets were valued at many times the amount of the loan in addition to our income.
We were told that "maybe" they could give us a $100,000 home improvement loan, but I didn't want to play that game of "maybe." So we sold some of our inappropriate assets, paid the entry fee at the continuing care facility, and gifted the home to the oldest son.
You hear the statment that "only people can get a loan that don't need it." In our case, we didn't need th loan and still couldn't get it. You don't need to be poor to be refused a loan.
* https://www.thebalance.com/definition-of-redlining-1798618
** https://www.nytimes.com/2020/02/13/us/politics/michael-bloomberg-redlining.html?auth=login-email&login=email
No comments:
Post a Comment